Nestlé in Ice Cream Joint Venture Talks with R&R

Vevey, Switzerland-headquartered Nestlé and R&R, a leading European ice cream company based in Leeming Bar, North Yorkshire, England, are in advanced discussions to set up a 50/50 joint venture operation covering ice cream in Europe, Africa and elsewhere.

The proposed deal aims to capitalize on the complementary strengths and innovation expertise of the two companies. The intention is to combine Nestlé’s successful brands and experience in “out-of-home” distribution with R&R’s competitive manufacturing model and significant presence in retail. Among products manufactured by R&R are Cadbury Flake Cones, Kelly’s Cornish ice cream and Rowntree’s Fruit Pastille lollies.

kellys-cornish-ice-cream“We are pleased to be in talks with R&R and its owner PAI Partners,” said Nestlé CEO Paul Bulcke. “We have a long-standing relationship with R&R. Combining the capabilities of our two companies in this way would offer an exciting opportunity for future growth in a dynamic category.”

R&R CEO Ibrahim Najafi added: “We are excited about combining the respective talents of R&R and Nestlé’s people to drive further growth in this category. The vision of the proposed joint venture is to grow a unique consumer and customer focused ice cream business serving all channels, delivering innovative, high quality ice cream through investment in people, process and products. The ambition of the proposed joint venture will be to sell more ice cream through meeting and exceeding customer and consumer needs.”

Nestlé’s business dealings with R&R in the past include its 2001 sale of Nestlé UK to the company, which was then operating as Richmond Ice Cream. The transaction included the Fab and Smarties brands. PAI bought R&R, which is primarily a producer of private label ice cream, from Oaktree Capital Management in 2013 for approximately €800 million. Some years before Oaktree merged Richmond with Roncadin, Germany’s biggest private label ice cream manufacturer, to create R&R Ice Cream.

Nestlé would contribute its ice cream businesses in Europe, Egypt, the Philippines, Brazil and Argentina to the new joint venture. It would also transfer its European frozen food businesses, excluding pizza, but reportedly including Erlenbacher, the frozen cake unit in Germany. The R&R Group would join the new joint venture in its entirety.

The deal, said to be valued at €3 billion (£2.2 billion) excludes Nestlé ice cream labels in the USA, which include Dreyer’s, Edy’s and Häagen-Dazs, but includes the rest of the 150-plus brand portfolio which runs the gamut from Movenpick to Nestlé Scholler and Extreme.

nestle-iceSales of Nestlé ice cream products reportedly rang up $67 billion in receipts last year, according to Euromonitor. That amounted to a 10.8% chunk of the international market, which is less than half of archrival Unilever’s share. R&R ranks as the largest producer of ice cream in Europe by volume, and is said to be the second largest volume packer in the world, after Unilever.

Following the conclusion of merger talks and employee consultations, and subject to approval from regulatory authorities, the new arrangements would be implemented in the course of 2016. Each partner would own an equal share of the joint venture, which would operate in more than 20 countries and employ over 10,000 people. It is proposed that the board of the new joint venture would be composed of senior executives from both partners, in equal proportion, and be chaired by Luis Cantarell, Nestlé’s executive vice president for Europe, the Middle East and North Africa.

Nestlé and R&R have worked together successfully for the past 14 years, initially in the UK and Ireland and, more recently, in Australia and South Africa where R&R licenses Nestlé brands. R&R’s owner, French private equity firm PAI Partners, is characterized by its industrial approach to ownership and consumer sector expertise.